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"11 Reflections on the Telecommunications Infrastructure."
Cities and Their Vital Systems: Infrastructure Past, Present, and Future.
Washington, DC: The National Academies Press, 1988.

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11
Reflections on the
Telecommunications Infrastructure
HARVEY BROOKS
This chapter raises a set of issues critical to the telecommunications
infrastructure by exploring three basic questions: (1) What are the impli-
cations of the shift in the United States from a planned telecommunications
infrastructure to one driven by market forces and largely dominated by a
few large users with highly sophisticated requirements (Borrus et al.,
19841? (2) How will the growth of telecommunications and the redistri-
bution of "information power" within organizations and among different
groups in the population affect human settlements and organizations (Downs,
19851? and (3) How can we best describe and project the evolution of the
telecommunications infrastructure (Borrus, 1986; Borrus et al., 1985~?
THE MARKET SHIFT
Probably the most important environmental factor determining the future
evolution of communications infrastructure in the United States is the shift
from a regulated monopoly to market-driven competition (Borrus et al.,
19841. Whereas the pace and direction of technological innovation were
once determined mainly by systems engineering and the goal of expanding
channel capacity and decreasing unit costs per bit, they are now driven
by the needs and requirements of a few of the largest telecommunications
users. The emphasis in the field is shifting from the transmission and
switching infrastructure to the increased sophistication of equipment and
"value added" on the user's premises (see chapter 101. The new envi-
ronment has been described in striking terms by Mayo (1985, p. 231:
249

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For decades electronic technologies have been pulled into the marketplace as fast
as humanly possible. Today's technology, however, is so rich that it can do more
things than society might find useful. Increasingly, marketing resources are re-
quired to sort out innovations, to contain the scope of development, and to focus
investment on the applications that will win in the marketplace.... Such a give-
and-take relationship between markets and technologists has long operated in low-
technology fields such as soaps and toothpaste. Today, there is a similar, rapidly
evolving relationship in fields of the highest technology, especially in computers,
software, and telecommunications.
The question that cannot yet be answered is whether this new, market-
driven system will automatically ensure optimization of the infrastructure
from a societal standpoint. For example, will the system continue to meet
the needs of smaller users, local communities, and the public sector,
especially the public sector below the federal and international level? How
will this new system affect the original ideal of a universal, affordable
service?
In a way the Bell System represented an ideal case of the success of a
planned economy encapsulated within the free enterprise system. It was
much more successful than any true planned economy, perhaps in part
because it continually defended itself with free enterprise rhetoric. It was
a case in which systems engineering of the whole subeconomy of tele-
communications worked well. It produced a single product telephone
service without terminal frills that was an ideal target for a planned
economy.* This ideal was predicated on the assumption that there were
what economists would call large positive externalities associated with
the maximum dispersal of customer connections that could not be fully
captured in the competitive price chargeable to the individual customer.
This positive externality justified some kind of collective subsidy that
actually took the form of a cross-subsidy from high-density traffic to low-
density traffic, and from sophisticated high value-added services to min-
imal basic services. As long as the requirements of large users could
essentially be met by simply increasing the number of plain old telephones
within the organization, the old system was in a position to satisfy all
users with the same basic technology; all the sophistication was built into
the public network. But as it became technically possible to provide more
and more sophisticated services on the user's premises (value added)
outside the public network, the needs of different kinds of users became
more and more differentiated, and pressures for a different system of
Thor an illuminating exposition of the philosophy and achievements of the "old" Bell
system, see Bode (1971).

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TELE COMM UNI CA TI ONS INFRAS TR UCTURE
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managing the supply of new technology became irresistible (Oettinger,
1984, 1985).
The justification for the old telephone system was technical integra-
tion that is, the maintenance of the technical integrity of the system as
new technology and new user services were incorporated into it. The
question has become whether this technical integrity can be maintained
in the face of much greater diversity in sources of technology and in user
requirements. How can the benefits of technical integration, standards,
quality control, and compatibility of different vintages of very long lived
and long-depreciation-life equipment be preserved in the new system while
realizing the advantages of more experimentation and competition? How
can present and potential users be more integrally involved in the planning
of new telecommunications systems? Because the service provided by the
old system was a basic standard commodity that the network could be
optimized to produce at minimum cost, customers were little affected by
the technical design of the network except through the cost and reliability
of the service they received. The only problem of the network was the
actual production of the service; it did not have to be tailored to the specific
needs of a variety of customers.
A closely related question is the extent to which the new deregulated
system will be degraded by the phenomenon of "cream skimming" as
high-volume services in dense information corridors are tailored to the
needs of large, sophisticated users and the cross-subsidization of services
used sparsely by large numbers of people is rigorously eliminated because
such services are relatively unprofitable. Will the trickle-down effect of
new technology developed for, and delivered to, the most sophisticated
and performance-oriented users automatically serve the needs of large
numbers of small users? Will a higher rate of innovation in a market-
driven system offset the decreased attention to users with less market
power? What objective function is in effect maximized by the new market-
driven system (i.e., what parameters of the communications system will
it tend to optimize), and how will its configuration and performance differ
from that of the old regulated system?
EFFECTS ON HUMAN SETTLEMENTS AND ORGANIZATIONS
Will information power become more concentrated and less accessible
to all, or will the abundance of information resources and channel capacity
lead to greater equality of access to the power conferred by the control
of information? Generally speaking, the various visions put forward in
Japan of a future information society anticipate equalization of information
power both regionally and among different groups of the population. Such

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lIARVEY BROOKS
visions picture the information society as a force for democratization and
participation (National Institute for Research Advancement, 19851. In the
West the view tends to be more in the direction of information power
giving an advantage to large organizations and to a few urban commu-
nications and transportation hubs with world-scale access. Most advocates
of the Third World see information technology, and particularly telecom-
munications, as widening the gap between the industrialized countries and
the Third World in such a way that the industrialized countries will greatly
increase their power to dictate to the Third World and arrange the world
economy to their own advantage. Others foresee this effect not only be-
tween the First and the Third Worlds but also between regions and cities
within the industrial countries. Which view is likely to be more correct?
To what extent is there a choice, and how can that choice be influenced
(United Nations Centre for Science and Technology for Development,
1986; Society for International Development, 19854?
What will be the effect of modern telecommunications on the future
configuration of a city? Will it make possible more dispersion to the
suburbs and even to the countryside, or is face-to-face contact still suf-
ficiently important that its advantages will not soon be replaced by so-
phisticated telecommunications? What is the prospect for the diffusion of
person-to-person video communications? What external factors are likely
to influence that prospect? Why did the Picturephone prove to be a tech-
nical success and a market failure (Bode, 19711?
What will be the influence of telecommunications on the comparative
advantage among different kinds of urban centers? Will telecommunica-
tions, possibly in combination with air transport, reinforce the hierarchy
among urban centers ranging from world-scale economic and communi-
cations nerve centers to local niche cities, or will the abundance of in-
formation channels make possible many more centers with approximately
equal connectedness to the world economy? The Japanese have attempted
some answers to these questions: they see the new information society as
decreasing the relative importance of such centers as Tokyo and Osaka,
pointing to the characteristics of communications technologies that tend
to make the cost of communication almost independent of distance (Na-
tional Institute for Research Advancement' 19851.*
In fact, Japan has systematically linked its plans for regional devel
~One source of information in this area is the proceedings of the International Symposium
on the Impact of New Communication Technologies on Local Government (1984) held at
the U.S. Department of State, Washington, D.C., from December 3-5, 1984. See also
Urban Innovation Abroad (1985). The symposium addressed different approaches taken in
Japan, the Federal Republic of Germany, and the United States.

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opment to telecommunications technology, actually building experimental
cities (that were going to be built anyway) incorporating all the latest
telecommunications technologies in such a way that their usefulness can
be tested. An example is Minato Mirai 21, a new city for 190,000 residents
near Yokohama. According to the summary of the 1984 International
Symposium on the Impact of New Communication Technologies on Local
Government, the new city "will be a resort showplace and will feature
wide-band communications systems, videotext, and interactive systems."
This development is all part of the Japanese ambition to become a model
"information society" in the next century (Urban Innovation Abroad,
19851. The tone is optimistic, and the thrust is toward integrated exper-
iments to test advanced concepts in operation in new cities.*
By contrast, the study of a series of small-scale demonstration proj-
ects in the Federal Republic of Germany places greater emphasis on
their economic, political, and social effects than on their technological
effects. The approach being developed by the Bundespost seems to be
one of caution and indeed technological pessimism, although, as re-
ported in Urban Innovation Abroad (1985), "local governments in
Germany are actively pushing their federal and state level counterparts
for more active experimentation and deployment of telecom technol-
ogies," seeing "the technologies as helping to create a more democratic
society where citizens have access to information from a variety of
sources." Thus, there is a second thrust in the German approach em-
phasizing local influence in shaping the future of telecommunications
technology in that country.
The dominant feature of the U. S . approach is diversity and heterogeneity
under the guiding influence of the market. The Urban Innovation Abroad
summary of the international symposium stated:
As a result of their experiences to date with telecommunications, the U.S. par-
ticipants talked less about grand schemes for how the technologies would change
their organizations and communities, and instead focused on the need to develop
a set of skills for planning, managing, and evaluating their use of telecommun-
ications in each of the three local government roles consumer, broker, and
sustainer of local democracy.
An avoidance of the "big picture" seems to pervade the U.S. approach.
The U.S. group, mainly represented by local officials, described telecom-
munications as
*See National Institute for Research Advancement (1985), pp. 93-99, for a discussion
of such concepts as Teleutopia, teleports, and the relation of telecommunications to regional
development and regional disparities in access to information.

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a complex web involving technology they knew little about, private sector vendors
who have done little to earn the trust of public officials, an intergovernmental
system that is oriented to deregulation despite the expressed concern of local
officials, intraorganizational concerns over how telecommunications will affect
jobs and responsibilities, and a citizenry that, for the most part, seems only to
want basic transmissions and diverse entertainment services at low cost. (Urban
Innovation Abroad, 1985, pp. 4-5)
What can be said about the effect of information technologies on the
nature and structure of organizations? Will the ease with which the center
of an organization can monitor and control its far-flung activities tend to
reinforce bureaucratic, hierarchical structures with a high degree of func-
tional specialization? Or will it lead to the creation of horizontal, and
relatively flat, networklike organizations with quasi-autonomous nodes
capable of coordinating their activities horizontally through instant access
to a common data base and to each other, either directly or by updating
their input to the common data base? In other words, will information
technology increase the capacity of a few big brains to control the activities
of more and more people, or will it increase the capacity of many "little
brains" to concert and coordinate their activities in a way that is equivalent
to, but much more effective than, one big brain that cannot keep everything
at the forefront of attention continuously, no matter how sophisticated the
information terminal (Brooks and Schneider, 19851?
Different countries have different attitudes toward this problem. The
Japanese characteristically take an optimistic view and have adopted an
aggressive attitude toward the creation of planned sophisticated networks
in the expectation that they will lead to democratization of access to
information services and a reduction in social differences arising from
such differential access (National Institute for Research Advancement,
19851.
Will modern information- and communications-intensive manufacturing
and office technologies make possible dispersed, flexible specialization
of the kind envisioned by Piore and Sabel in The Second Industrial Divide
(19841? Flexible specialization in their view means that modern comput-
erized manufacturing systems can be profitable with much shorter pro-
duction runs and can produce a larger variety of products with the same
capital equipment, thus making it possible to respond much more rapidly
and economically to changes in customer requirements and in the demand
mix for products. Flexible manufacturing has in fact advanced much fur-
ther in the manufacture of electronic, telecommunications, and computer
equipment than it has in metalworking industries (Borrus et al., 19841.
Furthermore, flexible manufacturing, combined with telecommunications,
makes possible a much higher degree of decentralization and smaller plants

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than in the past. If so, how will this affect the division of labor between
the industrialized and the developing worlds? Will the trend toward smaller
economic units promote the decentralization of labor-intensive components
of an integrated production process to areas where the cost of labor is
low, or will the trend toward just-in-time inventory management and the
closer integration of design, production, and marketing tend to drive com-
panies to repatriate economic activities that had previously been dispersed
to take advantage of low labor costs (United Nations Centre for Science
and Technology for Development, 1986; Society for International De-
velopment, 19851? As the fractional labor content of both goods and
service production becomes so small that labor costs are no longer a major
consideration in relation to inventory costs and the use of capital, will the
attraction of cheap labor disappear?
MEANINGFUL MEASUREMENT AND PROJECTION
What are the most meaningful measures of the volume of telecom-
munications services when the service increasingly consists of value added
by terminal equipment on the customer's premises rather than the flow of
bits between customers? Is it possible to analyze the future volume of
information services in a way that parallels Marchetti's (see chapter 7)
and Nakicenovic's (see chapter 8) analyses of the level of activity of
various transportation modes? In telecommunications, is it possible to
project a saturation such as Marchetti and Nakicenovic have projected for
air transport at about twice the present annual passenger-kilometer volume?
Can we foresee developments in telecommunications technology analo-
gous to the Mach ~ aircraft in air transport that could generate a new pulse
of exponential telecommunications growth? Would a breakthrough in soft-
ware production-a change from the labor-intensive art that it is today to
a mass-producible technology be a possible source for such a pulse?
What new functions for information technology could such a breakthrough
make possible?
Within the telecommunications system, to what extent is there regular
substitution of one mode for another? Historical experience may suggest
that substitution is less likely than some kind of ecological symbiosis
among old and new systems. It is unlikely, then, to be a question of wires,
cables, and so forth being superseded by satellites or of satellites being
superseded by optical fibers. The question is how these technologies will
fit together in an optimal system. What are the factors that govern this
optimization, and how can government-mandated rate structures influence
the future mix among different communications modes?

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CONCLUSION
The telecommunications infrastructure presents a different problem from
that of the rest of the infrastructure picture discussed in this book. A theme
in current debates is the decay of infrastructures and the general lack of
investment in and adoption of technological innovations that could increase
their productivity. This theme is by and large not valid for the commu-
nications infrastructure. Here, investment appears to be adequate to the
major needs, technological innovation is proceeding at a breathtaking pace,
and new technologies are adopted rapidly. Indeed, the problem is that the
life cycle of telecommunications technologies is shortening, and the pro-
liferation of new technical opportunities is outfacing the ability of society
to choose among them and to plan a coherent structure. The main problem
for the United States is whether the new reliance on the market to determine
the direction of innovation and infrastructure investment in telecommun-
ications will serve the public interest more effectively than the old system
of regulated monopoly, systems engineering, and technical integration.
That question may apply particularly to the "public goods" aspect of the
telecommunications infrastructure. It is too early to tell how the new
national experiment in telecommunications will come out.
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